Confusion Reigns Over New UK Tax Scheme Disclosure Rules

by Jason Gorringe, Tax-News.com, London

31 August 2004

Effective tax planning for Britons is becoming an impossible task due to the Inland Revenue’s refusal to state whether certain trust arrangements will be blacklisted under the new disclosure regime.

Gift and loan trusts, which can be used to shield assets from inheritance tax, are the latest schemes to be called into question, and could face a new income tax charge from next April as part of the government’s wider crackdown on tax avoidance. However, there remains much uncertainty as to whether these arrangements will be affected under the crackdown.

"There is still a great deal of confusion over these rules," Mike Warburton of accounting firm Grant Thornton observed, according to the Financial Times.

"If the Revenue refuses to confirm who will be caught and who won't, it will be impossible for people to do their tax planning and for providers to sell many types of trusts."

The Association of British Insurers was also critical of the Revenue, observing that:

"Originally the Revenue said these trusts would not be included but now they have told us they are. Not only are the proposals complicated, but it is not clear what will come under the new system."

A Revenue statement has done little to clear the waters. "There's no way of knowing for certain what the terms of any particular scheme is without seeing it in detail,” it announced.

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